Below is the current year production data for the company:
Direct material in units
Direct labor hours
Number of setups
Number of devices produced
The 210,000 units of material had a total cost of $1,365,000. Direct labor is $17 per hour.
The company has total overhead production costs of $1,850,000.
a. If Holt Medical Corporation applies factory overhead using direct labor hours, compute the total production cost and the unit cost for each model
b. If Holt Medical Corporation applies factory overhead using machine hours, compute the total production cost and the unit cost for each model.
c. Assume that Holt Medical Corporation has established the following activity centers, costs drivers, and costs to apply factory overhead.
Equipment Maintenance # of machine hours
Production Setup # of setups
Material Handling Units of Materials
Transportation Costs # of devices produced
Compute the total cost and the unit cost for each model.
d. Explain why the unit cost for each model is different across the three methods of overhead application. How can such information benefit an organization?
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